John Henneberger, a Co-Director of the Texas Low Income Housing Information Service, spoke at the May 5, 2011 board meeting of the Texas Department of Housing and Community Affairs (TDHCA) regarding the status of and proposed changes to the Hurricane Ike Disaster Recovery Housing Programs in Houston and Galveston.

Youtube videos of selections of his testimony below:

(update: transcript of John’s complete testimony after the jump)

[first round of testimony]

MR.HENNENBERGER: Good morning. My name is John Hennenberger. I am the co-director of the Texas Low Income Housing Information Service.

I have also been involved for quite some time on disaster recovery programs, as an advocate, looking at these programs. There are serious problems with the status of the programs that you have before you. These modifications to these agreements are almost an example of deja vu.

This is exactly the same process that this Board went through with the Hurricane Rita program. Where, because of the Governor’s decision to prioritize local administration of these programs, there are local jurisdictions which simply lack the capacities to successfully deliver housing assistance to their citizens in a reasonable amount of time.

It is our opinion that this is not the fault or the responsibility of this Department but it is the responsibility of the failure to adequately understand the lack of local capacity to administer these programs. That said, we have what we have before us.

And I would like to make some comments, Mr. Chairman, with regard to how I believe we should proceed. We are deeply concerned with the performance of the City of Galveston, Galveston County and the City of Houston with regard to their Disaster Recovery Programs.

The City of Houston’s program is basically almost hardly started, and the City has failed to put into place adequate measures to ensure that the problems that have hampered the production of single-family homes are going to be corrected.

The City has in place an arcane process of requiring different departments to sign off on each individual application that comes before them and for the City Council itself to consider each individual application that comes before it. That cripples production in these programs.

They produced eight housing units since Hurricane Ike. And we visited with Secretary Marquez on Friday. The homes of a number of people who have been waiting for three years for assistance under the City’s program, and basically, they just keep getting told, wait a little longer. Wait a little longer. But systemically, the problem is not being addressed, and the problem is with the City of Houston’s policies. We urge the Department to embed state staff within the City’s program to attempt to assist in a technical way, any way it can, the City to move forward with this and to set a firm six-month deadline on the City making the 20 percent goal.

And if they don’t make that goal, the State of Texas should transfer the responsibility for administering this program to a responsible entity. The State of Texas under the Hurricane Rita program recently completed its final homes under that program.

I say this is deja vu, because we went through this exact same process with Rita. Local jurisdictions were charged with trying to administer these programs. The programs drug out. People didn’t get their homes fixed.

The Department stepped in, took control of the programs and, finally, after a lengthy period of time, were able to put the units on the ground. People deserve homes, and were able to put the units on the ground. People deserve homes and we have got to deal with this.

I have a number of other concerns that I don’t have time to get to, among which is the proposal to increase the per-unit cost of homes in Galveston to a maximum of $197,000. Hurricane Rita homes that were built under the Department’s contracts cost $75,000 for an equivalent-sized unit.

The City of Galveston has before you a request to increase the cost to $195,000 per unit, with a concurrent reduction of the number of the families that can be helped on this program. If you can build houses for $75,000, why are we administering these programs through entities that require $195,000 to — administer these programs, it makes no sense to us.

The program is seriously broken. It is seriously off track. Largely, because of lack of local capacity. I understand that is not this Department’s creation but it needs to be fixed. Thank you very much.

[Second round of testimony]

MR.HENNENBERGER: My name is John Hennenberger.

I am the co-director of the Texas Low Income Housing Information Service. Weconcur with staff’s recommendation that the City of Houston be granted a six-month extension, instead of a one-year extension regarding this and be encouraged to put in place the necessary reforms, in order to be able to get their program to go faster.

We have a concern regarding the proposed extension for the City of Galveston. Particularly with relation to the performance on the rebuilding of 569 units of public housing, which have been demolished by the Galveston Housing Authority some time ago, which were flooded by Hurricane Ike.

The city has — the Housing Authority has missed the deadlines that have been imposed upon it to produce site plans for there construction of those units. They committed in a formal city council resolution to produce site plans for those units by April 1st. That was not accomplished.

There is a new approach the City is taking with regard to reconstructing those units which house the poorest victims of Hurricane Ike. That process envisions a very extensive development which is a mixed income development, which is highly contingent upon obtaining tax credits in addition to the hard dollars which you have allocated, the State has allocated to them to rebuild the 569 units.

They have the cash available in the allocation the State of Texas has made available to them, to rebuild the 569 units of public housing. The City is choosing to go beyond that, and create two units of market rate or non-mixed income housing if you will, for every one unit of public housing, to accomplish the laudatory goal of creating mixed income housing.

Our concern is that the availability of those funds is holding up the reconstruction of the 569 units of public housing. And you are being asked to commit to a two year additional extension to rebuild those units.

These are the poorest victims of Hurricane Ike. They want to come home. The money is available to the Galveston Housing Authority today and through the Round Two money, to rebuild those units without going to get tax credits. Without going to accomplish other financing vehicles and the like.

We believe that the City should be sent a clear message, you must produce the site plans that you committed by City Council resolution to produce for the reconstruction of those units very quickly. You have missed the deadline.

And then secondly, we should not delay the commencement of construction of the 569 public housing units while we attempt to identify tax credit and other funding which may never become available. Thank you very much.

[Third round of testimony]

MR.HENNENBERGER: My name is John Hennenberger. I am with the Texas Low Income Housing Information Service.

With regard to the Galveston County performance measures, the action which you took basically halved their production requirements. We believe it is very important that they have new specific performance goals, interim goals and long term goals for meeting the new half level performance that you have allowed them, that you have assigned to them.

Number two, the — I am going to try to sandwich this in. We have a deep concern about what the long term performance outcome is, of these homes. Weare talking about homes that are — that represent significant taxpayer investments in these houses.

MR. CONINE: Are you talking about specifically about Galveston County?

MR.HENNENBERGER: I am talking about, in general the performance of this, and what I see as an overall problem with performance.

MR. CONINE: Okay.

MR. HENNENBERGER: I am trying to sandwich this in. The $195,000 of equity in the home plus the value of the lot represents a significant financial asset. The way that the State secures the State’s financial grant to the homeowner is such that the property is not encumbered in a manner that would present the homeowner from doing, in our opinion a cash out home equity refinancing of that home.

We are concerned that this is public money and it needs to be properly secured. We have attempted to work, and there have been members in the Senate and the House who have offered legislation this session, that we have worked with them on, to try to craft a requirement that says for some period of time you cannot do a cash out home equity loan and take the equity that the State of Texas just put into these houses out.

Unfortunately, there turns out to be constitutional problems with doing this and which we hadn’t anticipated, but having gone through this process, and the hearings, we now are very aware of. This will be a — in my opinion — a potential catastrophe.

And there is opportunities for unscrupulous lenders to go in and to give people 20 percent, 30 percent, 40 percent cash value for their homes, on home equity loan, that they know they can’t payoff. Foreclose the property, and basically kick the family out. And then the equity is lost.

We have got to find a way to secure that equity for a long term. There is a five-year use restriction that is — the family is required to remain in the home for five years, and then it is gone.

But there is nothing in there that prevents in that interim — and that is too short, in my opinion I have to say but that is over and aside. That is what was decided.

But beyond that, we have got to find a way to prevent this from happening, or there is going to be a cottage industry of home equity lenders, not the major lenders, but the bottom feeders who are going to be in the market of stripping the taxpayers’ money out of these homes and these homes are going to be lost to these families.